Commissioner Of Income Tax,, Central Circle, Jaipur v. D.b. Spl. Appl. Writ

HIGH COURT OF JUDICATURE FOR RAJASTHAN ATJODHPUR D.B. Spl. Appl. Writ No. 1201 / 2014 1. Deputy Commissioner of Income Tax,, Central Circle-I, Jodhpur. 2. Commissioner of Income Tax,, Central Circle, Jaipur. ----Appellants Versus Sambhav Energy Limited, Having Its Office At 5,, DamodaranStreet, Kellys, Chennai (Tamil Nadu)- 600010 Through PradeepBhandari, General Manager.----RespondentConnected With D.B. Spl. Appl. Writ No. 1003 / 2014 Deputy Commissioner & Anr. ----Appellant VersusDaksha Kumari Jain ----Respondent D.B. Spl. Appl. Writ No. 1005 / 2014 Deputy Commissioner & Anr. ----Appellant VersusSambhav Energy Lit. ----Respondent D.B. Spl. Appl. Writ No. 1006 / 2014 Deputy Commissioner & Anr. ----Appellant Versus Nakoda Land Developers. ----Respondent D.B. Spl. Appl. Writ No. 1007 / 2014 Deputy Commissioner & Anr. ----Appellant Versus Krishna Dairy Product, ----Respondent D.B. Spl. Appl. Writ No. 1019 / 2014 Dy. Commissioner Of I.T. Jod., & Anr. ----Appellant Versus Sambhav Energy Limited ----Respondent D.B. Spl. Appl. Writ No. 1020 / 2014 Deputy Commissioner & Anr. ----Appellant VersusMukesh Modi. ----Respondent D.B. Spl. Appl. Writ No. 1021 / 2014 Deputy Commissioner & Anr. ----Appellant VersusPrakash Beverages ----Respondent D.B. Spl. Appl. Writ No. 1044 / 2014 Deputy Commissioner & Anr. ----Appellant Versus Nakoda Land Developers. ----Respondent D.B. Spl. Appl. Writ No. 1045 / 2014 Dy. Commissioner Of I.T. Jod., & Anr. ----Appellant Versus Bharat Das Vaishnav ----Respondent D.B. Spl. Appl. Writ No. 1046 / 2014 Dy. Commissioner Of I.T. Jod., & Anr. ----Appellant VersusNakoda Land Developers ----Respondent D.B. Spl. Appl. Writ No. 1047 / 2014 Deputy Commissioner & Anr. ----Appellant VersusPrakash Beverages ----Respondent D.B. Spl. Appl. Writ No. 1202 / 2014 1. Deputy Commissioner of Income Tax,, Central Circle-I, Jodhpur. 2. Commissioner of Income Tax,, Central Circle, Jaipur. ----Appellants Versus Prakash Beverages, Having Its Office At,, Krishna Nagar, Padeeb, Sirohi, Rajasthan Through Its Partner Smt. Daksha Jain W/o Shri Virendra Kumar Modi Aged About 47. ----Respondent _____________________________________________________ For Appellant(s) : Mr. K.K.Bissa For Respondent(s) : Ms. Archana for Mr. Sanjay Nahar _____________________________________________________ HON'BLE MR. JUSTICE GOVIND MATHURHON'BLE MR. JUSTICE VINIT KUMAR MATHUR Judgment Per Hon’ble Govind Mathur,J. 11/04/2017 These appeals are before us to examine correctness of the judgment dated 11.4.2014, passed by learned Single Bench in batch of writ petitions led by SB Civil Writ Petition No.1140/2014, 2. Commissioner of Income Tax,, Central Circle, Jaipur. ----Appellants Versus Prakash Beverages, Having Its Office At,, Krishna Nagar, Padeeb, Sirohi, Rajasthan Through Its Partner Smt. Daksha Jain W/o Shri Virendra Kumar Modi Aged About 47. ----Respondent _____________________________________________________ For Appellant(s) : Mr. K.K.Bissa For Respondent(s) : Ms. Archana for Mr. Sanjay Nahar _____________________________________________________ HON'BLE MR. JUSTICE GOVIND MATHURHON'BLE MR. JUSTICE VINIT KUMAR MATHUR Judgment Per Hon’ble Govind Mathur,J. 11/04/2017 These appeals are before us to examine correctness of the judgment dated 11.4.2014, passed by learned Single Bench in batch of writ petitions led by SB Civil Writ Petition No.1140/2014, Mukesh Modi v. Dy. Commissioner of Income Tax, Jodhpur,. By thejudgment impugned learned Single Bench, while accepting thepetitions for writ, quashed the notices issued under Section147/148 of the Income Tax Act, 1961 (hereinafter referred to as‘the Act of 1961’) to the petitioner assessees. As per learnedSingle Bench the expression ‘reason to believe’ as referred underSection 148 of the Act of 1961 means the existence of rationaland intelligible nexus between the reasons and the belief, so thaton such reason no one properly instructed on facts and the lawcould reasonably entertain the belief. On basis of this ratio learnedSingle Bench held that while issuing the notices under Section147/148 of the Act of 1961 the Assessing Officer had no reason tobelieve that any income chargeable to tax has escapedassessment for the assessment year and the Assessing Officersimply for his own verification and to clear his doubts andsuspicion initiated the proceedings impugned. We are in complete agreement with the interpretationaccepted by learned Single Bench pertaining to the expression‘reason to believe’ and on basis of that only we too have examinedvalidity of the notices in question. Before coming to that, it wouldbe appropriate to mention certain necessary facts in brief. A search as per Section 132 of the Act of 1961 andsurvey under Section 133-A were simultaneously conducted by theinvestigation wing of the Income Tax Department at thebusiness/residential premises of Modi @ Adarsh Group of Sirohi.Petitioners Mukesh Modi, Daksha Kumari Jain and Bharat DasVaishnav were eventually covered under the search action and thesurvey was conducted relating to Prakash Beverages, Nakoda LandDevelopers and Sambhav Energy. During the course of search andsurvey certain documents/loose papers were seized andimpounded. The entire process of search and survey was carriedout on 10.2.2010 and on 6.1.2011 a notice under Section 153-A ofthe Act of 1961 was issued to petitioners Mukesh Modi, DakshaKumari Jain and Bharat Das Vaishnav. A notice under Section 153of the Act of 1961 was issued to Krishna Dairy by placing relianceupon certain documents found during the course of search. Whileundertaking proceedings under Section 153-A of the Act of 1961the Assessing Officer scrutinised the material seized during thecourse of search and survey and after consideration of the sameissued a consolidated questionnaire to the assessees concerned. On 23.12.2011 the assessment under Section 153-A read withSection 143(3) of the Act of 1961 came to be completed bymaking certain additions of income tax in the hands of Mukesh On 23.12.2011 the assessment under Section 153-A read withSection 143(3) of the Act of 1961 came to be completed bymaking certain additions of income tax in the hands of Mukesh Modi, Daksha Kumari Jain and Bharat Das Vaishnav. Theassessments made by the Assessing Officer as above areadmittedly subject matter of appeals said to be pending before theCommissioner of Income Tax (Appeals). The Assessing Officer on22.3.2013, while recording reasons to reopen the assessmentunder Section 147 of the Act of 1961, issued notices under Section148 of the Act of 1961. While giving challenge to the noticesaforesaid the petitioners contended that no cogent reasons wererecorded by the Assessing Officer and whatever reasons recordedsuggest that the Assessing Officer has assumed jurisdiction toinitiate reassessment proceedings on its mere ipse dixit to clearsuspicions and for verification. It is also important to mention thatthe respondent petitioners responded the notice dated 22.3.2013on 31.5.2013 with following preliminary objections:- “a. The condition precedent for section 147 is thatthere must be a “reason to believe that incomechargeable to tax has escaped assessment” and thebelief entertained by ITO must not be arbitrary orirrational. b. It must be based on objective reasons which arerelevant and material. The belief must be in good faithand not merely be pretence. c. The act of ITO must be based on evidence and noton mere suspicion, imagination and speculation. d. In addition to above requirements there should besome direct nexus between the information inpossession and conclusion drawn by the authorityconcerned and any conclusion based on any irrelevantand extraneous material would vitiate its effect. e. There has to be fresh material/information inpossession of assessing authorities for the purpose offormation of belief that income of any particularassessment year has escaped assessment. f. The burden is on the revenue to establish that therewas income chargeable to tax, which has escapedassessment.” As already stated, learned Single Bench accepted theversion advanced by the assessee with specific finding that thenotices issued under Section 147/148 of the Act of 1961 are notsatisfying the pre-requisites as prescribed. To examine the entire issue, we have looked into thenotices issued under Section 147/148 of the Act of 1961. TheAssessing Officer, at the threshold, noticed that during the courseof search several incriminating documents alongwith cash,jewelery and other valuables were found and seized from variouspremises of the group concerned. During the course of survey aninventory of the consumable items, details of bank accounts, cheque books found, was also prepared. The material madeavailable was not matched by the survey team as the same werenot verifiable from the records. He also noticed that the cheque books, bank accounts etc. were belonging to various personswhich are not connected with day to day business affairs of the assessee. The Assessing Officer also provided necessary detailsrelating to dummy bills which were not taken into account earlier.By providing all necessary details the Assessing Officer recordedthat he had reason to believe that the amount ofRs.10,37,22,520/- and various other amounts chargeable to tax escaped during the assessment for the account year 2010-11. From perusal of the notice, it is apparent that the cheque books found, was also prepared. The material madeavailable was not matched by the survey team as the same werenot verifiable from the records. He also noticed that the cheque books, bank accounts etc. were belonging to various personswhich are not connected with day to day business affairs of the assessee. The Assessing Officer also provided necessary detailsrelating to dummy bills which were not taken into account earlier.By providing all necessary details the Assessing Officer recordedthat he had reason to believe that the amount ofRs.10,37,22,520/- and various other amounts chargeable to tax escaped during the assessment for the account year 2010-11. From perusal of the notice, it is apparent that the reason to believe that the income chargeable to tax has escapedassessment, is not mere suspicion but is based on good faith. TheAssessing Oficer has given complete details of the documentswhich were not taken into consideration earlier. The documentsreferred in the notice are also sufficient to show the direct nexusbetween the information in possession and conclusion withdrawnby the Assessing Officer. The Assessing Officer though was nothaving fresh material for the purpose of formation to believe thatthe income of any particular assessment year has escapedassessment, but with all bonafides he noticed that certaindocuments escaped consideration and that resulted into escape ofincome chargeable to tax. Learned Single Bench in detail has considered the entire law relating to pre-conditions for reassessment underSection 147/148 of the Act of 1961, but in our considered opinionhas not looked into the notices under Section 148 of the Act of1961 so minutely. Paras 3, 4, 5, 6, 7, 8 and 9 of the notice inspecific terms indicate the material to arrive at a conclusion tohave bonafide belief that a huge part of income which may bechargeable to tax was escaped. Looking to the document aforesaidwe are of considered opinion that the Assessing Officer hadadequate reason to believe to issue notice under Section 148 ofthe Act of 1961. Learned Single Bench failed to appreciate thenotice concerned in light of the scope and spirit of the pre-conditions for issuing a notice under Section 148 of the Act of1961. The appeals, thus, deserves acceptance, hence, areallowed. The judgment impugned dated 11.4.2014, passed bylearned Single Bench, is set aside. The writ petitions preferred bythe petitioner respondents are dismissed. (VINIT KUMAR MATHUR)J. (GOVIND MATHUR)J. MathuriaKK/PS